The Internet of Things…Internet of What?

As devices become more connected and are able to communicate with each other, banks will need to develop ways to participate in this new technology.

You may have heard of the concept "The Internet of Things." Or, like many people, you may see that term and think, “The Internet of What?" In my mind, this concept moved from the edge closer to mainstream this month as Qualcomm, Samsung, and Sony launched smart watches. Additionally, the Federal Trade Commission (FTC) sanctioned a wireless webcam maker for not taking adequate measures to secure the owner's privacy.

Dominic Venturo, U.S. Bank

The Internet of Things is a concept that basically covers devices that can connect together and communicate. A smart watch, for example, is able to connect to the Android phone and interact with specially designed apps. A Nike+ shoe monitor is placed inside the running shoe to communicate information to the Nike+ running app on the user’s mobile device. A Jawbone Up communicates all activities for a user during the day (steps taken, miles walked, etc.) and also can monitor sleep patterns at night. The results of which are viewed on the user's mobile device. These all fall into the concept called Wearable Computing, which is a subset of Internet of Things. Less sophisticated devices might include a wireless webcam that allows a user to access it via a special URL and password or a small device that can be attached to an item to track its location.

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What does this have to do with banking and technology? It depends. As devices become more connected and are able to communicate with each other, it seems reasonable to expect that we will need to develop ways to participate in this new technology. For example, a new company just announced a wristband that is able to use the heartbeat of the owner as a biometric authentication, or password. That is great, in theory, but in practice it means any company that currently relies on ID and password will need to re-engineer their authentication processes for this new device to accept the user ID and this biometric password, instead of, or in addition to, the typed password A simpler example might be enabling customers to receive alerts and basic information on their smart watch, smart glasses, etc.

The advent of connected, “smart” devices means that there will be an entirely new set of implications for customer privacy, disclosures, and, it appears, regulation. At the same time the FTC announced sanctions against the webcam maker, it announced that it would begin taking up the topic of Internet of Things and begin developing a framework for future regulation and guidelines.

Most importantly, it will open up an entirely new area for potential customer interaction and convenience. Imagine being able to glance at your watch and immediately see if your account is in a "green", "yellow", or "red" status. Or, being able to receive a reminder to pick up a prescription while driving near the pharmacy or something as simple as having your car recognize you when you get near and immediately adjust the radio presets, mirrors, seat, and climate control.

Consumers are still wary of biometric apps (fingerprints and such), which could be very useful when it comes to web enabled devices. On the one hand, authorizing a purchase with your fingerprint is very secure, but users are afraid of what could be done with their fingerprint data if it isn't secured.

At present, the utility of wearable technology is most successful within close ecosystems where the consumer has made the exchange of personnel information for convenience. DisneyG«÷s MagicBand http://tnw.co/ZeENCU service provides guests with a valued added experience during their stay at Walt Disney Theme Parks. For wearable computing to run free in the wild requires the regulatory and security framework that you outlined - otherwise the inconvenience of authentication will stop consumers from adoption. Biometric has promise, however, I can see substantial pushback from general population in the United States. The equation that be solved by product managers is how best to provide convenience and security. Solving that equation will result in a diminished level of privacy. My guess is that younger generations will be satisfied by the trade off, as they have already adopted a new norm of privacy by their active participation in social media.

At present, the utility of wearable technology is most successful within close ecosystems where the consumer has made the exchange of personnel information for convenience. DisneyG«÷s MagicBand http://tnw.co/ZeENCU service provides guests with a valued added experience during their stay at Walt Disney Theme Parks. For wearable computing to run free in the wild requires the regulatory and security framework that you outlined - otherwise the inconvenience of authentication will stop consumers from adoption. Biometric has promise, however, I can see substantial pushback from general population in the United States. The equation that be solved by product managers is how best to provide convenience and security. Solving that equation will result in a diminished level of privacy. My guess is that younger generations will be satisfied by the trade off, as they have already adopted a new norm of privacy by their active participation in social media.